A Special Needs Trust is a trust established to meet the supplemental needs of a person with a legally defined disability who is under the age of 65. The trust is funded with funds or assets which already legally belong to the disabled individual. These can be assets that are already in their name, a cause of action on behalf of the beneficiary which will provide a settlement amount or jury award to the beneficiary from a personal injury or medical malpractice action; accounts on which the beneficiary is already named as a beneficiary payee or joint tenant; or the beneficiary’s interest in a property settlement in a divorce action. A Special Needs Trust is commonly called a “first party trust” because the trust is funded with assets which belong to the beneficiary.
The Special Needs Trust may only be established by the beneficiary’s parents, Guardian or conservator or by court order. Whoever is establishing the trust is called the Grantor. Once funded the trust can be used to supplement the government assistance provided to the beneficiary. These benefits can include advanced medical treatments, education, leisure, furniture, appliances and activities. Once the trust is funded the Trustee is the person who manages the trust funds and makes disbursements on behalf of the beneficiary. Disbursements can only be made for the benefit of the beneficiary and not for the beneficiary’s spouse or family members. Because the funds belong to the beneficiary prior to their placement into the trust a Special Needs Trust must contain a “payback provision”. This provision provides that upon the death of the beneficiary the trustee must first satisfy any claim by the state for medical assistance benefits provided to the beneficiary.